[No. 61651-0-I. Division One. December 29, 2008.]
Kevin T. Steinacker and Shane L. Yelish (of Dickson Steinacker, LLP), for appellant.
Kara Heikkila (of Hall Farley Oberrecht & Blanton, PA) and Thaddeus O'Sullivan (of Holmes Weddle & Barcott), for respondent.
Authored by Ronald Cox.
Concurring: Linda Lau, Stephen J Dwyer.
¶1 COX, J. -- E. John Duncan appeals an order granting summary judgment to Alaska USA Federal Credit Union, dismissing his breach of contract and wage claim statute claims. There are genuine issues of material fact whether the employee handbook of Alaska USA promised specific treatment in specific situations and whether a bona fide dispute between the parties bars exemplary damages under the wage claim statute. But there are no genuine issues of material fact whether Alaska USA could unilaterally amend the terms of the compensation agreement between the parties. We affirm in part, reverse in part, and remand.
¶2 Alaska USA is a credit union that operates multiple branches in western Washington. In September 2000, Duncan began working for Alaska USA as the manager of its Kent branch. Upon being hired, Duncan acknowledged, in writing, receipt of an employee handbook that specified the terms of his performance reviews and compensation.
¶3 In 2003, Alaska USA created a business plan to introduce a new lending program in Washington. To facilitate the program, Alaska USA created the position of Pacific Northwest Credit Development Officer (CDO). Alaska USA identified Duncan for the CDO position based on his prior sales experience.
¶4 Following several discussions with Duncan, Alaska USA presented him with a written summary of a proposed compensation plan (2003 Plan). The 2003 Plan specified the basis points on new loans, bonuses, and minimum guaranteed compensation that Duncan would receive as compensation for the CDO position. The 2003 Plan also provided, "This compensation plan will be reviewed and potentially amended after one year and will be subject to such review and amendment annually thereafter." ¶5 Duncan's efforts as CDO were successful. A September 2004 employee evaluation states that Duncan met or exceeded expectations and that "[a]s a result of [Duncan's] efforts, in a very short time the Pacific Northwest volumes have grown to become about 25% of the credit union's dealer businesses." ¶6 In the fall of 2004, Alaska USA significantly amended downward Duncan's compensation scheme (2004 Plan). The 2004 Plan also provided, "This amended compensation plan replaces all terms and conditions of the previous compensation plan and will be subject to review and amendment semi-annually." ¶7 Duncan received notice of this amendment by an October 5, 2004 e-mail that referenced a telephone conversation on the day before. Duncan objected but ultimately signed an agreement based on this new plan, which had an effective date of October 1, 2004. ¶8 At the end of March 2005, Alaska USA extended the 2004 Plan through the end of April 2005. Duncan signed this extension as well. ¶9 In May 2005, Alaska USA again amended Duncan's commission rate downward (2005 Plan). The 2005 Plan was to be reviewed again in three months. Duncan again objected. Duncan also signed this agreement, which had an effective date of May 1, 2005 and was apparently signed on May 3, 2005. ¶10 Upon expiration of the 2005 Plan, a compensation plan with nearly identical terms was provided to Duncan with an effective date of August 1, 2005. Alaska USA successively extended the 2005 Plan to December 31, 2005, March 31, 2006, and June 30, 2006. Duncan signed these amendments as well. ¶11 Duncan took leave from Alaska USA under the Family and Medical Leave Act of 1993, 29 U.S.C. $ 2601. After exhausting that leave, he retired in October 2006. ¶12 Duncan commenced this declaratory judgment action, alleging breach of contract and violation of the wage claim statute. He seeks exemplary damages under the wage claim statute and other relief. The trial court granted Alaska USA's motion for summary judgment, dismissing the action. ¶13 Duncan appeals. EMPLOYEE HANDBOOK ¶14 Duncan argues that there are genuine issues of material fact whether Alaska USA breached the terms of its employee handbook that promise specific treatment in specific situations. We agree. ¶15 We review a grant of summary judgment de novo. [1] ¶16 "Generally, an employment contract, indefinite as to duration, is terminable at will by either the employee or employer." if an employer, for whatever reason, creates an atmosphere of job security and fair treatment with promises of specific treatment in specific situations and an employee is induced thereby to remain on the job and not actively seek other employment, those promises are enforceable components of the employment relationship. ¶17 Here, Duncan claims that Alaska USA breached the terms of its handbook when it reviewed the terms of his CDO compensation plans more frequently than annually, reducing his compensation when it did so. Specifically, Duncan cites section 4.3 of the employee handbook under the heading "Salary Adjustments." In relevant part, it states: Salary reviews and adjustments will occur no more frequently than [annually], except if: an employee is assigned to a new or existing position in a different category; or a revision to an employee's job description is made resulting in the assignment of significantly more or less responsibility; or the scope of responsibility of an employee's position is significantly changed; or as market conditions warrant. ¶18 Duncan argues that a genuine issue of material fact exists whether this language constitutes Alaska USA making a promise of specific treatment in specific situations, thus obligating it to review and adjust his compensation no more frequently than annually. [2, 3] ¶19 To demonstrate a breach under the specific treatment prong, a plaintiff must prove "(1) that a statement (or statements) in an employee manual or handbook or similar document amounts to a promise of specific treatment in specific situations, (2) that the employee justifiably relied on the promise, and (3) that the promise was breached." Specific Treatment in Specific Situations [4] ¶20 Mere "general statements of company policy" that do not "amount to promises of specific treatment" are not binding. [5] ¶21 Courts have found a question of fact as to the existence of a promise for specific treatment where the language of an employee manual could be construed to require the employer to utilize a certain process or procedure. ¶22 Similarly, in Swanson v. Liquid Air Corp., [6] ¶23 Here, the handbook language that "[salary] adjustments will occur no more frequently than [annually]" is like that described in Thompson and Swanson. Arguably, this handbook language is mandatory. For example, the word "will" has been held to be mandatory, not discretionary. ¶24 Alaska USA argues that the handbook language is not a promise of specific performance as a matter of law. However, the cases relied upon by Alaska USA for such a holding are inapplicable here because the policy manuals either made no promise of specific treatment at all ¶25 For example, in Trimble v. Washington State University, ¶26 Similarly, in Drobny v. Boeing Co., ¶27 In Stewart v. Chevron Chemical Co., ¶28 We note that of the four exceptions to the salary adjustment provision, only the "market conditions" clause provides a potential basis for reviewing Duncan's compensation more frequently than annually under the circumstances of this case. But Alaska USA provides no argument in its brief suggesting that a change in market conditions was the basis for reviewing and reducing Duncan's compensation earlier than the first annual anniversary of starting the job as the CDO as of November 1, 2003. Here, his annual review and the reduction of his compensation occurred in October 2004--short of the one year anniversary of Duncan's appointment to the CDO position. While deposition testimony suggests that Alaska USA considered the compensation its competitors were paying similarly situated employees as a market condition, ¶29 Duncan also refers to two provisions, nearly identical to one another, found in both the employee handbook and the personnel policy manual under the heading "Salary Increases." ¶30 The parties make much of the effect of the word "may" within these provisions. However, Duncan concedes that he "has never argued that Alaska USA breached the 'Salary Increases' provision of the Employee Handbook." ¶31 Additionally, Duncan quotes language from a personnel policy manual that describes circumstances under which salary reductions are based. [7] ¶32 In sum, whether market conditions, as provided under section 4.3 of the employee handbook, warranted early review of Duncan's compensation is a genuine issue of material fact. Justifiable Reliance [8] ¶33 The next issue is "[w]hether [Duncan] justifiably relied on promises of specific treatment in specific situations," a question for the trier of fact. ¶34 Here, Duncan cites numerous sections of the record in which he made statements showing his reliance on the handbook. ¶35 In response, Alaska USA points to certain deposition testimony by Duncan that it construes as an admission that he did not rely upon the handbook. But this shows the existence of material factual disputes, which are well suited for a finder of fact, not a trial or appellate court. ¶36 Alaska USA cites only a United States District Court case in which the court held that an employee did not, as a matter of law, justifiably rely on an employee manual. In Rosen v. AT&T Mobility, LLC, ¶37 Rosen does not control here. ¶38 Alaska USA also argues that the use of the word "salary" in the handbook precludes Duncan's claim of reliance because Duncan acknowledged in a deposition that he was commissioned, not salaried. ¶39 In sum, whether Duncan justifiably relied upon the handbook's provision for annual compensation reviews is another genuine issue of material fact. ¶40 Duncan argues that he is entitled to enforce provisions of the handbook because the handbook was never modified during the entire course of his employment as CDO. He also claims he was entitled to receive reasonable prior notice of changes to the frequency of his reviews and compensation changes. Neither argument is persuasive. ¶41 Relying on Govier v. North Sound Bank, ¶42 There, a former bank employee claimed that she was terminated in violation of the bank's employee handbook after she refused to sign a new employment agreement. Although the bank's policies regarding benefits and job security were legally enforceable, its obligations existed only while its policies were in effect. When the Bank changed the duration of Govier's employment from an indefinite period to one year, and eliminated vacation leave and sick and holiday pay, the former contract terms were no longer enforceable. The court affirmed summary judgment in favor of North Sound Bank. [9] ¶43 Here, the employee handbook provision regarding annual salary review was unchanged throughout Duncan's employment with Alaska USA. However, assuming that provision was legally enforceable, Alaska USA's obligations existed only while the provision was in effect. When the 2004 Plan altered the frequency with which Alaska USA would review Duncan's CDO commission scheme, the handbook provision regarding annual salary review was no longer enforceable in that respect. Nothing in Govier suggests that an individual employee cannot contractually obligate himself to terms different from those in an employee handbook. Duncan did just that when he signed the 2004 Plan and the subsequent extensions and amendments to it. Duncan cannot now claim that each of those agreements was in violation of the employee handbook. [10-12] ¶44 Duncan next argues, relying again on Govier, that the amendments to his CDO commission scheme are unenforceable because he was not given reasonable prior notice. There is no requirement for reasonable notice to be prior notice. ¶45 "An employer may unilaterally amend or revoke previously established policies and procedures as long as the employee receives reasonable notice of the change." [13] ¶46 Here, Duncan, as an affected employee, was provided with the 2004 Plan and the subsequent extensions and amendments to it, each of which specifically indicated that Duncan's CDO compensation scheme would be reviewed more frequently than annually. Duncan's signature on each of these documents demonstrates that he had actual, and therefore reasonable, notice that the employee handbook provision regarding annual salary review did not apply to him. Thus, the 2004 Plan and the subsequent extensions and amendments to it are enforceable despite the fact that the employee handbook remained unchanged. ¶47 In sum, Duncan received reasonable notice of the 2004 Plan and the subsequent extensions and amendments to it. It is irrelevant that the employee handbook was unchanged during the term of his employment. Disclaimer ¶48 Alaska USA argues that disclaimer language associated with its handbook negates any claim of reliance on Duncan's part. This too is unpersuasive. [14, 15] ¶49 "[A]n employer's inconsistent representations and conduct may negate or override a disclaimer. . . ." ¶50 Here, Duncan points to a letter he received from Alaska USA's executive vice president in 2005 that stated, "As you know, the terms of your employment, as well as that of all Alaska USA employees, are clearly and completely documented in the credit union's Employee Handbook and its Personnel Policy Manual." ¶51 Alaska USA argues that the disclaimer language in its handbook is not properly before this court because a copy of the handbook is not in this record. Yet Alaska USA quoted the disclaimer language from the acknowledgment that Duncan signed when first hired. If the credit union believed the handbook should have been in the record, it should have put it there when arguing below. We fail to see the significance of the location of the disclaimer language. Rather, the issue is whether the language is effective to avoid creating obligations that the employer must honor. ¶52 Alaska USA also argues that Duncan did not sufficiently argue the disclaimer issue below. In his response to Alaska USA's motion for summary judgment, Duncan, in a single sentence, noted, "[a]n employer's disclaimer that employee handbook polices do not affect the employment relationship can be negated by inconsistent representations and practices of the employer. [Swanson, 118 Wn.2d at 532]; Carlson v. Lake Chelan Community Hospital, 116 Wn. App. 718, 75 P.3d 533 (2003)." [16] ¶53 Duncan first argues in his reply brief that genuine issues of material fact exist whether Alaska USA contractually obligated itself to abide by the employee handbook, as stated under the first prong of Thompson. NATURE OF COMPENSATION AGREEMENT ¶54 Duncan next argues that the 2003 Plan agreement was a binding, bilateral contract, the terms of which could not be unilaterally modified by Alaska USA without additional consideration. We disagree. Statute of Frauds ¶55 We start with Duncan's response to Alaska USA's argument that the 2003 Plan agreement violated the statute of frauds. Alaska USA argues that the 2003 plan agreement is void under the statute of frauds because it is not evidenced by a writing signed by the credit union. Although Duncan asserted below that there was such a signed agreement, he has never produced a copy. For purposes of our analysis, we assume there never was such a signed agreement. [17] ¶56 Under Washington's statute of frauds, "[e]very agreement that by its terms is not to be performed in one year from the making thereof . . . shall be void, unless such agreement, contract or promise, or some note or memorandum thereof, be in writing, and signed by the party to be charged therewith . . . ."